Microeconomic Decision-making in an Islamic Framework

  • Masudul Alam Choudhury


Two major methodological approaches can be discerned in the literature on economic decision-making.1 One approach has devoted itself to the development of economic decision-making studies based on cost-benefit techniques,2 capital budgeting3 and valuation of industrial projects,4 especially as the associated problems with this approach emanates from the firm’s balance-sheet and the income statement.5


Capital Stock Social Welfare Function Capitalisation Rate Investment Alternative External Economy 
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Notes and References

  1. 4.
    L. E. Bussey, The Economic Analysis of Industrial Projects (Englewood Cliffs, N. J. Prentice-Hall, 1978).Google Scholar
  2. 5.
    D. Vickers, The Theory of the Firm: Production, Capital and Finance (New York: McGraw-Hill 1968).Google Scholar
  3. 6.
    W. H. Jean, The Analytical Theory of Finance (New York: Holt, Rinehart & Winston, 1970).Google Scholar
  4. 7.
    K. J. Arrow, and M. Kurz, Public Investment, the Rate of Return, and Optimal Fiscal Policy (Baltimore, Md: Johns Hopkins University Press. 1970).Google Scholar
  5. 8.
    W. Sharpe, Portfolio Theory and Capital Markets (New York: McGraw-Hill Inc., 1970).Google Scholar
  6. 11.
    G. A. Taylor, Managerial and Engineering Economy (New York: Van Nostrand Co., 1975) chap. 1.Google Scholar
  7. 13.
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  8. 20.
    K. J. Arrow, Social Choice and Individual Values (New York: Wiley & Sons, 1951).Google Scholar
  9. W. J. Baumol, Welfare Economics and the Theory of the State (London: Bell, 1965).Google Scholar
  10. 23.
    H. B. Chenery, ‘The Interdependence of Investment Decisions’, in Readings in Welfare Economics, ed. K. J. Arrow and T. Scitovsky (Homewood, Ill.: Irwin 1969).Google Scholar
  11. 25.
    J. Hirshleifer, Investment, Interest and Capital (Englewoods Cliffs, N. J. Prentice-Hall, 1970). chap 9 and 10.Google Scholar
  12. 26.
    J. M. Henderson, and R. E. Quandt, Microeconomic Theory (New York: McGraw-Hill Inc., 1971) chap. 7.Google Scholar
  13. 27.
    P. A. Samuelson, Foundations of Economic Analysis (New York: Atheneum, 1970) chap. VII.Google Scholar
  14. 37.
    M. A. Mannan, Islamic Economics (Lahore, Sh. Muhammad Ashraf, 1975).Google Scholar
  15. 38.
    M. A. Choudhury, ‘The Rate of Capitalization in Valuation Models in an Islamic Economy’, Fiscal Policy and Resource Allocation in Islam, ed. Z. Ahmed et al. (Jeddah: International Centre for Research in Islamic Economics, King Abdulaziz University, and Institute of Policy Studies, Islamabad, Pakistan, 1983).Google Scholar
  16. 39.
    W. W. Rostow, The Stages of Economic Growth (New York: Cambridge University Press, 1967).Google Scholar
  17. 41.
    An interesting pioneering study on the economics of altruism is to be found in David Collard’s, Altruism and Economy: A Study in Non-Selfish Economics (New York and Oxford: Oxford University Press, 1978).Google Scholar
  18. 42.
    Even in a Western economy the non-profit sector called the ‘third sector’ is found to contribute significantly to aggregate economic activity. See Burton A. Weisbrod’s, The Voluntary Non-Profit Sector: An Economic Analysis (Lexington, Mass., and Toronto: Heath, Lexington Books, 1977).Google Scholar
  19. 45.
    The usual types of stochastic processes covered are Markov processes. See K. Borch, ‘Decision Rules depending on the Probability of Ruin’, Oxford Economic Papers (Mar 1968); F. Hanssman, ‘Probability of Survival as an Investment Criterion’, Management Science (Sep 1968); J. Steindl, Random Processes and the Growth of Firms (New York: Hafner Publishing Co., 1965) chaps iv and v.Google Scholar
  20. 47.
    R. Dorfman, P. A. Samuelson, and R. M. Solow, ‘Efficient Programs of Capital Accumulation’, in Linear Programming and Economic Analysis (New York: McGraw-Hill Inc., 1958).Google Scholar
  21. 48.
    A similar problem, but for a consumer and over intertemporal time horizon is solved by J. M. Henderson, and R. E. Quandt, in their Microeconomic Theory (New York: McGraw-Hill Inc., 1971) chap. 8.Google Scholar
  22. 50.
    J. L. Riggs, Engineering Economics (McGraw-Hill, 1977) chap. i.Google Scholar
  23. 51.
    M. A. Choudhury, An Islamic Social Welfare Function (Indianapolis, Ind.: American Trust Publication, Jan 1983) Chapter III.Google Scholar
  24. 52.
    L. E. Bussey, The Economic Analysis of Industrial Projects (Englewoods Cliffs. N. J. Prentice-Hall 1978) chap. 3.Google Scholar
  25. 55.
    M. D. Intrilligator, Mathematical Optimization and Economic Theory (Englewoods Cliffs, N. J.: Prentice-Hall, 1971) chap. 10.Google Scholar
  26. 56.
    Note that due to the predominance of investment activity and of consumer durables, the idea of human capital can be treated in an Islamic framework more from an investment approach. See H. G. Johnson, ‘Towards a Generalized Capital Accumulation Approach to Economic Development’, Residual Factor and Economic Growth, (Paris: OECD 1964).Google Scholar
  27. 62.
    P. A. Neher, Economic Growth and Development (Wiley & Sons, 1971) chap.Google Scholar

Copyright information

© Masudul Alam Choudhury 1986

Authors and Affiliations

  • Masudul Alam Choudhury
    • 1
  1. 1.University College of Cape BretonNova ScotiaCanada

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